“Points to Note on Financial Management for Subvented Non-governmental Organisations”

To facilitate subvented Non-governmental Organisations (NGOs)’ compliance of financial management requirements set out in the Lump Sum Grant (LSG) Manual, the Social Welfare Department (SWD) has prepared a set of “Points to Note on Financial Management for Subvented Non-governmental Organisations”, which summarises the common observations during Accounting Inspection conducted by SWD, for reference by subvented NGOs.

This set of “Points to Note on Financial Management for Subvented Non-governmental Organisations” is intended to provide reference for NGOs. They should be read in conjunction with the LSG Manual and should not be regarded as a substitute for the relevant content of the LSG Manual.

The actual rate of employer’s PF contributions should be the same as that in the September Snapshot Staff position submitted by the non-governmental organisation (NGO) to SWD.

SWD would calculate the PF subvention for Snapshot Staff according to the updated staff position as reported by NGOs in September each year with contribution rates capped at previous recognised level (i.e. 5% for Snapshot staff with contributory service of less than 10 years, 10% for the 11th to 15th years and 15% for the 16th year or over), unless a lower rate is advised by NGOs. If the actual rate / amount of employer’s PF contributions is different from that reported in the Snapshot Staff position previously submitted to SWD, NGOs should report the updated information (including the actual rate / amount of employer’s PF contributions) in the next return to SWD in order to ensure that the information for calculating PF subvention is accurate.

PF for Snapshot Staff and 6.8% posts should be separately stated in respect of the PF subvention received and PF expenditure in the non-governmental organisations’ accounting records.

Where a Snapshot Staff member is replaced by a non-Snapshot Staff member, the PF contribution for the non-Snapshot Staff should be charged to the PF subvention for 6.8% posts and not the PF Reserve for Snapshot Staff.

PF subvention for both Snapshot and non-Snapshot Staff are paid provisionally according to the position reported in the previous September return. When the actual PF subvention is determined, the actual surplus / shortfall for Snapshot Staff as well as the additional subvention for 6.8% posts arising from departure of Snapshot Staff will be taken into account in determining future PF subventions.

3.

Other income – Proper financial reporting on income from operating other miscellaneous services incidental to the operation of the subvented service (e.g. sale of daily necessities and medical items or photocopying service)

Income from operating other miscellaneous services incidental to the operation of the subvented service should be separately accounted for and reported in the annual audited financial statements and Annual Financial Report.

When operating income generating activities, non-governmental organisations should ensure that the activities are in line with the aims and objectives of their organisations, the relevant legal requirements are strictly abided by (such as the terms of the land grant and tenancy agreements, the licensing requirement and copyright issue), subvented activities are not affected and in general there is no detrimental effect on welfare services.

4.

Annual Financial Report (AFR) – Other funding allocations from the Social Welfare Department (SWD) (e.g. Block Grant under Lotteries Fund, grants for other projects or programmes) in the AFR

An AFR in respect of all its Funding and Service Agreement (FSA) activities (including support services to FSA activities) funded under Lump Sum Grant Subvention System should be prepared by non-governmental organisation. Grants from SWD not under the Lump Sum Grant Subvention System including Block Grant under Lotteries Fund, etc. should not be included in the AFR. Likewise, the related expenditure should be excluded from the AFR.

5.

Annual Financial Report (AFR) – Basis of preparation

AFRs should be prepared on cash accounting basis for stewardship purposes and in line with the Government accounts.

6.

Internal control – Adoption of internal control procedures set out in Annex 6 to the Lump Sum Grant (LSG) Manual

Internal control is fundamental to sound and prudent financial management. Non-governmental organisations (NGOs) should always ensure that adequate internal controls are in place having regard to the nature and size of and the services provided by the organisation.

Annex 6 of the LSG Manual provides advice on internal control procedures in respect of important financial activities. NGOs should formulate their own internal control procedures and develop their own internal control systems to achieve the desired objectives. The Social Welfare Department may review if the procedures are appropriate during accounting inspection and give advice thereon.

In the circumstances where NGOs have not yet developed their own internal control procedures, they are expected to follow the internal control procedures set out in Annex 6 to the LSG Manual.